Community Health sues Humana to recover $7.3M in payments for drugs to low-income and uninsured

Community Health Network is suing insurer Humana Inc., claiming the Louisville company owes it $7.4 million in drugs for its members under a federal program.

The Indianapolis-based hospital system filed suit this month in Marion Superior Court, accusing Humana of breach of contract and unjust enrichment.

Community Health said Humana intentionally withheld reimbursement for outpatient prescription drugs provided to Humana’s Medicare Advantage members between Jan. 1, 2018, and Dec. 31, 2022.

Specifically, the drugs were provided under a Medicare program known as 340B, which is intended to serve low-income and uninsured patients.

The heavily redacted complaint accuses Humana of failing to make good on certain rates set by the U.S. Centers for Medicare and Medicaid Services and later adjusted after a U.S. Supreme Court decision during the time period.

“Accordingly, Humana is in breach of its agreement with [Community Health] and Humana has been unjustly enriched by its actions,” Community’s lawsuit said.

Humana officials did not immediately respond to an email from IBJ seeking comment. The company has not yet filed a response to the complaint.

The program in question, 340B, is worth tens of billions of dollars a year to health care providers. The 340B shorthand stands for the section of the Public Health Service Act set up in 1992 to help hospitals buy drugs at a deep discount for low-income or uninsured patients in outpatient clinic settings.

Congress passed the 340B program to give more assistance to “covered entities”—often small county hospitals or inner-city clinics that helped patients left behind by bigger hospitals. The program was open to a specific set of hospitals that take care of a large number of low-income patients.

Under the program, drug manufacturers are required to provide drugs at a discount to so-called “safety-net hospitals” and community care.

For more than three decades, thousands of hospitals have provided drugs, mostly injections and infusions, to treat a wide range of ailments, from asthma and arthritis to muscle swelling and kidney disease.

But the program took a sharp turn when the U.S. Department of Health and Human Services, which administers the program, cut reimbursement payments in 2018 to participating hospitals by nearly 30%.

That prompted the hospital industry to file a series of suits and appeals in federal court on behalf of its members.

The Supreme Court ruled unanimously in 2022 that the federal government unlawfully cut the payments to hospitals without following proper procedure, including conducting a survey of the hospitals’ acquisition cost of the drugs from pharmaceutical drugmakers.

As a result, thousands of U.S. hospitals recouped more than $9 billion under a proposed remedy that the federal agency rolled out in 2023.

As part of that, more than 40 Indiana hospitals stood to collect a total of $222.2 million in lump-sum repayments to make up for what they lost over the past five years.

In response to the Supreme Court ruling, the Centers for Medicare and Medicaid Services issued an unspecified lump sum payment to Community Health for the difference between the unlawful 340B rates paid and the legal reimbursement rates.

But Community Health said Humana was also responsible for making payments to the Indianapolis-based hospital system for Medicare recipients who were enrolled in Humana’s Medicare Advantage Plans.

Named as defendant is Health Value Management, doing business as ChoiceCare Network. It is a wholly owned subsidiary of Humana.

Community Health said Humana’s failure to reimburse it for 340B drugs provided to Humana’s members during the time period in question has resulted in a windfall for Humana.

Humana will continue to receive a windfall when Medicare reduces the rate by an additional 0.5% for 16 years beginning in 2026, the complaint said.